How to Choose the Right Property Valuation

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There are many ways to have a property valued. How do you know which method is the most accurate?

There’s often a lot riding on the outcome of property valuation. You might be trying to get a home loan or access your equity for a renovation. Maybe you’re selling your property and need a target sale price, or you’re buying and don’t want to pay too much.

For whatever reason a valuation is needed, you want to be sure of an accurate result. After all, the property price estimate has the potential to sway your decision-making. It might determine how much you decide to pay for a property or indicate that now is the right time to sell. If you’re looking to refinance and the property value comes in lower than you expected, it could bring about an unwelcome change to your plans.

Here we look at the different ways a property can be valued.

Market appraisals

Appraisals and valuations are often confused. Market appraisals are usually offered by real estate agents, whereas property evaluations occur through lenders or automated valuation websites.

Buyers and sellers find market appraisals useful because they give an estimate of the property's value on the real estate market. Typically, the real estate agent's comparison of other similar property sales forms the basis for this estimate.

A market appraisal can help you decide how much to buy or sell a property for but be wary of real estate agents who overestimate your property's value to secure your listing. Ask for the list of homes they have based their pricing on and have the agent explain how these prices fit within the current state of the market.

Valuation with a qualified valuer

When a bank or lender requires a definitive value for a property, they use a qualified valuer working on their behalf. This kind of comprehensive evaluation is more common for transactions that pose a high risk to the lender such as hefty or high Loan to Value Ratio (LVR) loans. They’re also used to establish the value of deceased estates, interstate purchases, properties in high-risk postcodes or resolve legal disputes.

It tends to be a more conservative estimate because it's not intended to reflect what you could sell the property for. Instead, it's more about giving the bank a realistic assessment of the price they would get if the property had to be sold.

Did you Know?

Some lenders offer a free valuation as part of the loan package - saving you hundreds of dollars in valuation fees. Call us to find out which lenders.

Take the first step

The valuer will visit the property to check out features like land size, the number of bedrooms, car spaces, location, its age, fixtures and fittings, design and layout, zoning and development potential.

Sometimes the valuer does an external inspection and doesn't enter the property – known as a kerbside inspection or drive-by. Incorporated with this information is data about recent sales in the area and other market conditions.

You'll probably find the lender won't be keen to share the valuation with you. Consider paying a qualified valuer to get a separate valuation.

Online Valuations

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Reliability is expected to be less of a problem over time as new players come on the market.”

An automated program rather than a person is responsible for estimating a property’s value with online valuations. These websites use what's known as an Automated Valuation Model (AVM) to input data from publicly available sources like property transfers, deeds of ownership and tax assessments. Recent comparable sales in the area, past sales of the property and its size, age and features are also included.

Although most AVMs don't review the property's interior or exterior, some will include street visuals just like a drive-by appraisal.

The downside of AVMs is that they rely entirely on the data fed into them and don't account for the condition of the property. For this reason, their accuracy varies widely depending on the different mathematical modelling used by each.

Reliability is expected to be less of a problem over time as new players come on the market determined to find the perfect algorithm for guaranteeing accurate results.

Talk to a Yellow Brick Road local representative for more information regarding property valuations. We're a source of reliable advice on all things lending.